56 Exercise 16-4 (Algo) Financial Ratios for Debt Management (LO16-4] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 700,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company's common stock at the end of this year was $27. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Last Year Year Assets Current assets: $ Cash 1,150 1,220 Accounts receivable, net 9,600 8,000 Inventory Prepaid expenses Total current assets 12,600 11,100 650 560 24,000 20,880 ce Property and equipment: Land 11,000 11,000 Buildings and equipment, net 41,774 35,572 Total property and equipment $2,774 46,572 76,774 67,452 Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities. Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Total paid-in capital Retained earnings $ 19,600 18,000 920 8 8401 100 20,520 18,940 8,300 8,300 28,820 27,240 2,000 2,000 Additional paid-in capital 4,000 4,000 6,000 6,000 41,954 34,212 47,954 48,212 $ $ 76,774 67,452 Total stockholders' equity Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation Sales (dollars in thousands) This Last Year Year $ $ 75,000 64,000 expenses: Selling expenses Cost of goods sold Gross margin 43,000 40,000 32,000 24,000 Selling and administrative 11,000 10,700 6,800 6,100 Total selling and administrative 17,800 16,800 expenses Interest expense 14,200 830 7,200 830 13,370 6,370 Administrative expenses Net operating income Net income before taxes: Income taxes Net income Dividends to common stockholders Net income added to retained earnings Beginning retained earnings Ending retained earnings 5,348 2,548 8,022 3,822 288 350 7,742 3,472 34,212 30,748 $ $ 41,954 34,212